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19 Mar 2015
Currency wars and EUR decline – Rabobank
FXStreet (Edinburgh) - Jane Foley, Senior Currency Strategist at Rabobank, expects the single currency to keep grinding lower in the upcoming periods.
Key Quotes
“A continuation of USD strength will facilitate further loosening of monetary conditions in the Eurozone by exerting more downside pressure on the EUR/USD”.
“Via its huge bond buying scheme and the resultant pressure on Eurozone bond yields, the ECB is already ensuring that the value of the EUR should remain depressed”.
“The weakness of the EUR has posed considerable concerns for other central banks in Europe. In the minutes of the March MPC published yesterday, the BoE warned that divergent policy trends between the UK and the Eurozone “might continue to put upward pressure on the sterling exchange rate” resulting in a lower for longer inflation rate. The message was that UK rates could also stay low for longer”.
“The Riksbank, which surprised the market yesterday with a 15bp rate cut and a SEK 30 bln boost to its QE plan, has also been explicit in referring to the impact of the exchange rate on policy”.
“Neither the SNB nor the Norges Bank announced further policy measures today, though both maintain the threat of further action”.
“We view the recent slew of measures by the Riksbank, DNB, SNB and Norges Bank as defensive and aside from the Norges Bank (which has also suffered from the oil price shock) most of the measures are aimed at preventing the ECB exporting its deflationary risk via the weak EUR”.
“That said, in view of the size of the ECB’s QE plan we expect the EUR to creep lower against most major currencies this year”.
Key Quotes
“A continuation of USD strength will facilitate further loosening of monetary conditions in the Eurozone by exerting more downside pressure on the EUR/USD”.
“Via its huge bond buying scheme and the resultant pressure on Eurozone bond yields, the ECB is already ensuring that the value of the EUR should remain depressed”.
“The weakness of the EUR has posed considerable concerns for other central banks in Europe. In the minutes of the March MPC published yesterday, the BoE warned that divergent policy trends between the UK and the Eurozone “might continue to put upward pressure on the sterling exchange rate” resulting in a lower for longer inflation rate. The message was that UK rates could also stay low for longer”.
“The Riksbank, which surprised the market yesterday with a 15bp rate cut and a SEK 30 bln boost to its QE plan, has also been explicit in referring to the impact of the exchange rate on policy”.
“Neither the SNB nor the Norges Bank announced further policy measures today, though both maintain the threat of further action”.
“We view the recent slew of measures by the Riksbank, DNB, SNB and Norges Bank as defensive and aside from the Norges Bank (which has also suffered from the oil price shock) most of the measures are aimed at preventing the ECB exporting its deflationary risk via the weak EUR”.
“That said, in view of the size of the ECB’s QE plan we expect the EUR to creep lower against most major currencies this year”.